Question

The following list includes selected permanent accounts and all of the temporary accounts from the December 31 unadjusted trial balance of Emiko Co., a business owned by Kumi Emiko, Emiko Co. uses a perpetual inventory system.

Credit Debit $ 30,000 5,600 33,000 $529,000 Merchandise inventory Prepaid selling expenses Dividends Sales Sales returns and allowances Sales discounts Cost of goods sold Sales salaries expense Utilities expense Selling expenses Administrative expenses 17,500 5,000 212,000 48,000 15,000 36,000 105,000
Additional Information
Accrued and unpaid sales salaries amount to $1700. Prepaid selling expenses of $3,000 have expired. A physical count of year-end merchandise inventory is taken to determine shrinkage and shows $28.700 of goods still available.
(a) Use the above account balances along with the additional information, prepare the adjusting entries.
(b) Use the above account balances along with the additional information, prepare the closing entries.

Answer 1

a) Dr Sales salaries expense $1,700

Cr Sales salaries payable $1,700

Dr Selling expense $3,000

Cr Prepaid selling expense $3,000

Dr Cost of goods sold $1,300

Cr Inventory $1,300

b) 1. Dr Sales revenue $529,000

Cr Income summary $529,000

2. Dr Income summary $444,500

Cr Cost of goods sold $213,300

Cr Sales return and allowance $17,500

Cr Sales discount $5,000

Cr Sales salaries expense $49,700

Cr Utilities expense $15,000

Cr Selling expense $39,000

Cr Administrative expense $105,000

3.Dr Income summary $84,500

Cr Retained earnings $84500

4. Dr Retained earnings $33,000

Cr Dividend $33,000

Explanation:

a) Preparation of the adjusting entries.

Dr Sales salaries expense $1,700

Cr Sales salaries payable $1,700

Dr Selling expense $3,000

Cr Prepaid selling expense $3,000

Dr Cost of goods sold $1,300

($30,000-$28,700)

Cr Inventory $1,300

b) Preparation of the closing entries.

1. Dr Sales revenue $529,000

Cr Income summary $529,000

2. Dr Income summary $444,500

($213,300+$17,500+$5,000+$49,700+$15,000+$39,000+$105,000)

Cr Cost of goods sold $213,300

($212,000+$1,300)

Cr Sales return and allowance $17,500

Cr Sales discount $5,000

Cr Sales salaries expense $49,700

($48,000+$1,700)

Cr Utilities expense $15,000

Cr Selling expense $39,000

($36,000+$3,000)

Cr Administrative expense $105,000

3. Dr Income summary $84,500

($529,000-$444,500)

Cr Retained earnings $84500

4. Dr Retained earnings $33,000

Cr Dividend $33,000